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The economic similarities between today and 1980 are plentiful. Whether it is gold prices, unemployment, energy volatility or general malaise, history seems to be repeating itself. Unlike thirty years ago, however, we are neither expecting or experiencing a recovery. This past Friday, Stephen Moore addressed the issue with a rousing salute to Ronald Reagan's economic program. Not shockingly, it was also a not too thinly slap in the face of Keynesianism under the guidance of President Obama. He also misspelled Obamanomics, if a not quite real word can actually be misspelled.

Though there are elements of huff and puff to the article, there is also a very salient message. One which is directly connected to many of the debates we have been having here on WSO as of late.

Moore:
The two presidents have a lot in common. Both inherited an American economy in collapse. And both applied daring, expensive remedies. Mr. Reagan passed the biggest tax cut ever, combined with an agenda of deregulation, monetary restraint and spending controls. Mr. Obama, of course, has given us a $1 trillion spending stimulus.

By the end of the summer of Reagan's third year in office, the economy was soaring. The GDP growth rate was 5% and racing toward 7%, even 8% growth. In 1983 and '84 output was growing so fast the biggest worry was that the economy would "overheat." In the summer of 2011 we have an economy limping along at barely 1% growth and by some indications headed toward a "double-dip" recession. By the end of Reagan's first term, it was Morning in America. Today there is gloomy talk of America in its twilight.

In my opinion, the most interesting point in Moore's argument is one that cannot be disputed. America was in deep financial turmoil in the late 70's. The world was a lot crazier place than it is today. People were suffering and times were tight. Yet, the U.S. under Reagan rose up and enjoyed an unprecedented economic growth run which made many Americans millionaires merely via the old buy and hold.

Congruently, Wall Street boomed like never before. Bonuses were gargantuan, the hedge fund and private equity industries grew up, matured and became the masturbatory inspiration of many a monkey. Yet interestingly enough, very few people on this forum propagate the underlying ideals of Reaganomics. More and more industry professionals (from those I speak to) seem to be accepting Keynesianism vis-a-vis Obamanomics as the proper way to go.

Whether I have the right impression or not, I am still very curious what the poll numbers would be if I went up and down Wall Street asking monkeys to choose between the two dogmas. In either case, I suggest checking out the comments to the article...some good arguments on both sides of the equation.

Comments (11)

  • MMBinNC's picture

    Obama can't do what Reagan did because he has trapped himself in the Keynesian ideological box. If he lowers taxes and deregulates it would be a complete 180, and if it didn't succeed in a year (which would be hard) he will go out as the worst President ever in the eyes of the retards who voted him in and America in general. Right now he is the worst President ever in a lot of people's eyes, but not all of his constituents. He probably knows that he could fix this by doing supply side stuff, but Democratic presidents won't be able to do that because it is supposedly pro-business and pro-rich. Rather than do something that his base may not like and help out America, he would rather cater to the liberals and leave America mired in this dismal situation.

    Reality hits you hard, bro...

  • duffmt6's picture

    Stopped reading after "$1 trillion dollar spending stimulus", since that is a complete and utter mischaracterization. The stimulus bill was ~40% tax cuts. Also, rounding to $1 trillion is a pretty liberal interpretation if you ask me.

    I think analyses like these are fatally flawed from the start- the president only controls so much of the economy, and circumstances are never the same, especially 3 decades apart.

    My personal opinion is that Reagan and Obama have far more in common than any hardcore fiscal conservatives or hardcore fiscal liberals are willing to admit.

    "For I am a sinner in the hands of an angry God. Bloody Mary full of vodka, blessed are you among cocktails. Pray for me now and at the hour of my death, which I hope is soon. Amen."

  • In reply to duffmt6
    jimbo_slice's picture

    duffmt6:
    Stopped reading after "$1 trillion dollar spending stimulus", since that is a complete and utter mischaracterization. The stimulus bill was ~40% tax cuts. Also, rounding to $1 trillion is a pretty liberal interpretation if you ask me.

    Haha... it's ironic that you're talking about "mischaracterizations" of the stimulus bill. Substantially all of the "tax cuts" were one-time tax rebates, primarily to people who don't pay any income tax to begin with. So, in other words, more like spending than tax cuts.

    But, "mischaracterizations" aside, does anyone really think that dramatically shrinking the size of government so that we can all pay less in taxes to finance it wouldn't get the economy moving again? I don't think the issues we face as a nation are particularly complicated.

    It's also absolutely spineless how Obama and the Democrats in Congress are trying to raise taxes. Politicians in Washington, Left and Right, approved more spending than the government had revenue to pay for, all to create dependent classes and win votes for their reelection efforts. Now that the government is bankrupt due to their actions, we all have to fork over more "revenue". The Republicans contributed just as much to the deficit, but at least they aren't taking a shot at the taxpayer for a problem the politicians created.

  • In reply to duffmt6
    freroht's picture

    duffmt6:
    Stopped reading after "$1 trillion dollar spending stimulus", since that is a complete and utter mischaracterization. The stimulus bill was ~40% tax cuts. Also, rounding to $1 trillion is a pretty liberal interpretation if you ask me.

    I think analyses like these are fatally flawed from the start- the president only controls so much of the economy, and circumstances are never the same, especially 3 decades apart.

    My personal opinion is that Reagan and Obama have far more in common than any hardcore fiscal conservatives or hardcore fiscal liberals are willing to admit.

    Agree with the comment above The effects cannot be the same as with Reagan, it is just impossible. There is the law of diminishing returns. On top of that all econometric models I have worked showed little relationship between tax cuts (for top 10 percentile) and growth. You need tax cuts across the board, and guess what: 50% of the population is already paying little tax. The only way using low taxes can help now would be to have SS tax at 0%, payroll tax at 0% and reimburse State sales taxes to people making less than $50K.

    If these things are implemented you will have 3-4% growth. You can also bet that the deficit will be $2T a year.

    And another thing about 5-7% growth: will not happen anymore, the US population is just too old.

  • In reply to freroht
    MMBinNC's picture

    freroht:

    And another thing about 5-7% growth: will not happen anymore, the US population is just too old.

    This sounds like what people were saying during Carter. Democrats suck at responding to the economy in crisis. Carter. Obama. FDR. ...yea. Democrats are ok when they are in office during good economic times (Clinton) but otherwise they suck economically.

    Reality hits you hard, bro...

  • Scott Irish's picture

    Clintonomics? What did Clinton do (maybe that's the point), and how wasn't Gingrich connected to it in some way?

  • Frabjous's picture

    If I understand correctly, you are all saying that a situation in which the US had roughly $4000bn debt is very similar to a situation in which the US have roughly $12000bn debt

    Please tell me I didn't understand correctly

  • In The Flesh's picture

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  • In reply to In The Flesh
    UFOinsider's picture

    Get busy living